- We discussed both 25 and 50 bps
- There are some mixed signals in the economic data
- We cut by 50 bps for 2 reasons: 1) We no longer need policy that's clearly in restrictive territory. 2) All the data tilts towards a softer economic outlook for GDP growth compared to October estimates
- Cites lower immigration targets as a reason to suspect lower growth
- The threat of tariffs on Canada is a major source of uncertainty but we don't know if they will be implemented
- We can't run policy on something that might happen
- We are in excess supply, the economy has been soft
- We haven't seen widespread job losses like you would typically see in a recession
- Most of the 'weakness' in the Canadian dollar is appreciation in the US dollar
- We will have to factor in Canadian dollar weakness into forecasts
- We will keep an eye on how immigration and rate cuts compete in the housing market
- We are not expecting a recession
- Asked about ongoing cuts, cites 175 bps in cuts "that's a lot"
- Cuts will be working their way through the economy
- Going forward, I expect we will be considering further cuts to rates
- If economy evolves as anticipated, we will be taking a 'more gradual approach'
- It will be 'more gradual' than the 50 bps we cut at the last two meetings
- We will be considering further reductions but we will take them one meeting at a time
- There is clearly some slack in the labor market
There isn't much of a hint on January rates here and the market is pricing in a 56% chance of a cut but only 61 bps in all of 2025 as the BOC lands between 2.50-2.75% at year end. I suspect we will end up lower than that but -- like the BOC -- we will have to wait to see the data. So far, Canadian consumer spending has held up better than expected. That said, the spring housing market is a big risk.
USD/CAD has mostly been unmoved during the press conference but USD/CAD is down 40 pips since the BOC decision to 1.4140.
